Saturday, February 4, 2012

Weekly Indicators: self-sustaining recovery Edition

- by New Deal democrat

Most of the monthly reports released this week were stellar. 243,000 new jobs were added, and the internals, including the leading indicators of manufacturing jobs and workweek, were positive. And no, as my colleague SilverOz pointed out, 1.2 million workers did not suddenly vanish. In fact, as Calculated Risk has shown, labor force participation increased 0.3% month over month. Factory orders, another leading indicator, also increased. Only consumer sentiment (of enhanced significance in the new LEI regime) fell. The ISM manufacturing index rose, and the ISM services index strongly so. The Chicago PMI fell slightly, but remained above 60. Personal income rose 0.5% while spending was flat. Auto sales reached a 3 1/2 year high. Construction spending was up. Prices of houses sold in November continued to decline.

Turning now to the high frequency weekly indicators:

Weekly employment-related data was generally up.

The BLS reported that Initial jobless claims fell by 10,000 to 367,000, the third lowest report in close to 4 years. The four week average declined by 1750 to 375,750. This too is close to the lowest level since mid-2008.

The American Staffing Association Index declined by 1 to 86 last week, but remains significantly higher than last year.

The Daily Treasury Statement showed that withholding for the month of January 2012, $158.7 B was collected vs. $152.9 B a year ago. Since there were only 19 reporting days this January vs. one year ago, adding in December 30 to make a 20 day vs. 20 day comparison, $169.9 B was collected this year, for a gain of 11% YoY. (Had I used February 1 instead, the comparison would have been $179.1 B this year vs. last year).

Housing data was once again mixed:

The Mortgage Bankers' Association reported that seasonally adjusted purchase mortgage applications decreased 4.3% YoY and was also down -1.7% from one week ago. The overall trend remains flat since June 2010. Refinancing fell -3.6% in the last week. Mortgage applications have trended down for the last several months, although the overall flat trendline since May 2010 is still intact.

For the eighth week in a row, YoY weekly median asking house prices from 54 metropolitan areas at Housing Tracker were positive, up +3.8% YoY. This is the best reading in close to 5 years. The number of metropolitan areas with YoY positive sking prices increased to 32. The number with YoY declines of greater than 5% remained at 7.

Sales and transportation were weak or mixed:

The ICSC reported that same store sales for the week ending January 28 increased 3.9% YoY, and were up a slight +0.1% week over week. Shoppertrak, did not report, however, Johnson Redbook reported a 2.0% YoY gain, the weakest in 6 months.

The American Association of Railroads reported mixed weekly rail traffic for the week ending January 28, 2012, with U.S. railroads originating 283,654 carloads, down 2.8 percent compared with the same week last year. Intermodal volume for the week totaled 235,028 trailers and containers, up 5.5 percent compared with the same week last year.

Money supply and Credit spreads were also mixed:

M1 increased +0.5% last week, and +3.0% month over month. It is also up 19.0% YoY, so Real M1 is up 16.0%. This is about 5% off peak YoY gain at the end of last summer. M2 was flat week over week, and up +1.4% month over month, and up 10.1% YoY, so Real M2 was up 7.1%. This is about 3% less than its YoY reading at the crest of the tsunami.

Weekly BAA commercial bond rates increased .09% to 5.29%. Yields on 10 year treasury bonds rose .05% to 2.01%. The credit spread between the two had a 52 week maximum difference in October but tightened slightly in the last month.

Gasoline usage in particular continues to be much lower YoY:

Oil fell about $2 this week to close at $97.84 a barrel. This is slightly below the recession-trigger level calculated by analyst Steve Kopits (adjusted for general inflation). Gas at the pump rose $.05 to $3.44. Measured this way, we are slightly above the 2008 recession trigger level. Gasoline usage, at 7967 M gallons vs. 8549 M a year ago, was off -6.8%. The 4 week moving average is off -7.3%. Since last March the YoY comparisons have been almost uniformly negative, and substantially so since July. This week features one of the biggest declines in the 4 week average since then.

Now let's turn to new high frequency indicators designed to track the global slowdown/recession:

The TED spread is at 0.456 down from 0.500 week over week. This index is now back below its 2010 peak, and has declined from its 3 year peak of 5 weeks ago. The one month LIBOR is at 0.261, down .009 from one week ago, below its 12 month peak of four weeks ago, remains below its 2010 peak, and is approaching its typical level of the last 3 years.

The Baltic Dry Index at 726 continued to plummet, although at a lesser rate, -79 ti 647, and drastically off its October 52 week high of 2173 (although this is nothing even remotely close to its decline during the Great Recession). The Harpex Shipping Index declined two to 392 in the last week, but is above its 52 week low of 389 four weeks ago. Please remember that these two indexes are influenced by supply as well as demand, and have generally been in a secular decline due to oversupply of ships for over half a decade. The Harpex index concentrates on container ships, and has been leading at recent tops and lagging at troughs. The BDI concentrates on bulk shipments such as coal and grain, and has been more lagging at the top but has turned up first at the 2009 trough.

The Dow Jones Bond Index increased .10 to 116.37. The JoC-ECRI industrial metals index declined from 126.84 to 124.41, reversing most of the gain of one week before. The former is a positive, the latter a negative for the calculation of ECRI's weekly leading index.

While some of the weekly reports were mixed, the big picture is that, just like one year ago, the US economy is attempting to attain escape velocity for a self-sustaining recovery. Although like one year ago the Oil choke collar remains engaged, consumer conservation and increased production are weakening its hold. Global worries have continued to abate. There remains no sign of any present or imminent downturn in the economy right now. If there is a caution flag, it remains that wages have not kept up with prices for the last year, and this is manifesting itself in consumer spending and some weakening in same store retail sales.

Have a good weekend.